In this paper we systematically evaluate how central banks respond to inflation deviations from target. We present a stylized New Keynesian model in which agents' inflation expectations are sensitive to inflation deviations from target. To (re-)establish credibility, optimal monetary policy...

We evaluate and compare alternative monetary policy rules, namely average inflation targeting, price level targeting, and traditional inflation targeting rules, in a standard New Keynesian model that features recurring, transient zero lower bound regimes. We use determinacy and expectational...

Taylor rules posit a linear relationship between the output gap, inflation, and short-term nominal interest rates. Previous work has shown that the relationship between these key economic variables as captured by the Taylor rule is quite robust both across countries and monetary policy regimes....

The purpose of this paper is to evaluate the behavior of monetary authorities in Tunisia and Egypt, in response to changes in macroeconomic variables over time based on LSTR model. In this sense, we estimate Taylor-type equations for short-term interest rate in Tunisia and Egypt using quarterly...

No. I demonstrate that econometric estimations of nominal interest rate rules may tell little, if anything, about an economy's determinacy properties. In particular, correct inference about the interest-rate response to inflation provides no information about determinacy. Instead, it could...

The Taylor rule has become the dominant model for academic evaluation of out-of-sample exchange rate predictability. Two versions of the Taylor rule model are the Taylor rule fundamentals model, where the variables that enter the Taylor rule are used to forecast exchange rate changes, and the...

This article compares two types of monetary policy rules - the Taylor-Rule and the Orphanides-Rule - with respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared....

This article compares two types of monetary policy rules - the Taylor-Rule and the Orphanides-Rule - with respect to their forecasting properties for the policy rates of the European Central Bank. In this respect the basic rules, results from estimated models and augmented rules are compared....

In this study, we compare simple sum and Divisia monetary aggregates under a Taylor rule formation for the U.S. economy to figure out if there exists any improvement in the estimation of inflation and output when a theoretically convincing definition of money i.e., Divisia money, is utilized....

The Taylor (1993) rule for determining interest rates is generalized to account for three additional variables: The money supply, money velocity, and the unemployment rate. Thus, five parameters, i.e. weights assigned to the deviation in the inflation rate, the deviation in real GDP (Gross...